AAU Merger
On February 23, 2007 Chesapeake and American Gold completed the statutory plan of
arrangement involving American Gold, its shareholders and 076973 B.C. Ltd. (a wholly owned
subsidiary of Chesapeake). Under the Arrangement, Chesapeake has issued 9,020,602 common
shares, 902,060 Series 1 Class A shares and 4,510,301 warrants.
Each Chesapeake warrant entitles the holder to purchase one Chesapeake common share at an
exercise price of $8.00 for a term of five years expiring February 23, 2012. Each Chesapeake
Series 1 Class A share shall be automatically convertible, for no additional consideration, into
Chesapeake common shares on or after the date on which the average of the London PM fix
closing trading price of gold for the trading days on such market during any consecutive 90 day
period is equal to or greater than US$850 per ounce of gold. Each Chesapeake Series 1 Class A
share will be convertible into ten Chesapeake common shares. Accordingly, for each American
Gold common share previously held, the former holder has acquired, in addition to 0.29 of a
Chesapeake common share, 0.029 of a Chesapeake Series 1 Class A share which provides rights
of conversion, on certain conditions, into 0.29 of an additional Chesapeake common share in
accordance with the special rights provided under the Chesapeake Series 1 Class A shares.
Chesapeake Series 1 Class A shares not converted into Chesapeake common shares during the
five year term provided for conversion will be subject to redemption by Chesapeake for a small
amount.
Securities Number Exercise Price Expiry Date
Options 980,000 $3.30 December 12, 2008
Warrants 4,510,301 $8.00 February 23, 2012
Metates
Metates is one of the largest, undeveloped disseminated gold and silver deposits in Mexico. The
property is comprised of five exploitation concessions totalling 2,420 hectares. In 1996,
predating NI 43-101 requirements, Cambior Inc. using a 0.70 g/t equivalent gold cut-off,
calculated a tonnage and grade estimate of 492 million tonnes of 0.74 g/t gold, 18.2 g/t silver and
0.17% zinc, which is contained within a 823 million tonne (0.50 g/t equivalent cut-off)
mineralized system. The reported resource does not comply with NI 43-101 standards nor has it
been verified by Chesapeake and therefore should not be relied upon.
The Metates deposit occurs in two zones: the Main Zone with mineralization hosted in the
intrusive and its underlying sediments and the North Zone, with mineralization found in volcanic
conglomerates and adjacent sediments. Previous exploration concentrated on drilling the Main
Zone. The down-dip extensions of the Main and North Zone remain open.
Chesapeake’s primary effort at Metates is the comprehensive analysis of the exploitation
potential including mineralogical analysis, metallurgical testing, mine planning, flow sheet
development and project design. Development work is underway in two phases. The first phase
is updating Cambior Inc.’s 1997 pre-feasibility study based on mining the upper portion of the
intrusive mineralization in the Main Zone hosting 122 million tonnes at a grade of 0.87 g/t gold,
15.32 g/t silver and .29% zinc and an additional 162 million tonnes at 0.21% zinc. The first
phase will utilize Cambior’s same pit geometry with technological improvements in mine
engineering and mineralogical processing, a revised flow sheet plan and current metal prices
including zinc recovery.
During the quarter Chesapeake signed a five year agreement with the local community around
Metates enabling the Company to undertake the planned exploration and development work onsite.
A 10,000 meter (HQ core) drill program commenced late November to test the grade,
continuity and distribution of the mineralization within the Main Zone.
The second phase of development will incorporate the results from the new drilling and detailed
metallurgical test program into a thorough evaluation of treatment approaches for the remaining
mineral inventory not included in Cambior’s pre-feasibility study that are hosted in sediments
overlying a lower intrusive zone. Phase II metallurgical test work will largely focus on
determining the most economic processing route for the sediment material. The sediment rock
type will require an alternative treatment approach.
Results from the current drill program will be used to update the tonnages and grades of the
deposit including more precise quantitative analysis of the zinc content. Chesapeake expects to
complete a NI-101 pre-feasibility report on Phase I in the second quarter of 2008.
CKG is a major part of my PF and has been since it started trading....those who can buy and hold will soon be rewarded as things are picking up and I suspect double digits will happen before the end of the year....(well still 30 days left but looks like I will have to pay Tom his blood money)
Wayne |
